ONSHORE GIPPSLAND BASIN Permits

EXPLORATION ACTIVITIES in GIPPSLAND BASIN

PRL2, Gippsland Basin (Lakes Oil: Operator, varying interest across permit - subject to reserved rights)
PRL3, Gippsland Basin ( Lakes Oil operator, 100% interest)
PEP166, Gippsland Basin (Lakes Oil: Operator; 75% interest)

The Wombat Gasfield is located within PRL2, onshore in the Gippsland area. It is Lakes Oil’s most progressed development, with four wells completed prior to introduction of the onshore exploration ban.

The Wombat project targets the massive Strzelecki Formation, the upper section of which is weathered and can produce gas conventionally (ie, without need for reservoir stimulation).

Lakes achieved gas flows of 3 TJ/d from the Wombat-3 well, prior to subsurface mechanical failure of the well-reservoir interface. Oil has also been produced.

Lakes proposes to drill the Wombat-5 well as soon as approval can be secured. Wombat-5 is to be a directionally drilled well with a cost of the order of $4m. This conventional method of drilling is different to previous exploratory attempts at Wombat, and Lakes is confident that significant gas flow rates will be achieved. Independent modelling of the well indicates it may produce around 10 TJ/d.

Potential

The independently estimated resource potential of PRL2 is summarised in the following table.

Field

Wombat

Trifon-Gangell

Estimated Recoverable Gas*

329 Bcf (2C)

390 Bcf (2C)

*Source of Estimate: Lakes Oil NL 2016 Annual General Meeting Presentation. The Company is not aware of any new information or data that materially affects the information included in the relevant market announcement and confirms that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

Timing

Planning for the Wombat-5 well was completed prior to introduction of the onshore gas exploration ban. The well can be drilled at short notice.

If the production potential of the Strzelecki Formation is proven, gas processing and compression facilities will need to be installed to deliver gas to market (via the Tasmanian Gas Pipeline, which runs to the east of the Wombat field). Infrastructure establishment will take around 18 months, at a cost of the order of $50m. Up to 12 additional gas wells (drilled from just three wellsites) would also need to be drilled over the life of the project.